As the President of Canada’s Fraser Institute, an independent, nonpartisan public policy think tank, I have the good fortune of studying and analyzing business and economic climates worldwide. The success of any economy hinges on its institutions — laws, regulations, property rights, governance structures and cultural norms. While entrepreneurial talent is universal, these institutions ultimately determine whether entrepreneurs engage in productive, society-enhancing activities. That’s why it is crucial to understand both the empirical data and the perspectives of business leaders and entrepreneurs regarding their country’s business and economic environment. 

At the Fraser Institute, we annually produce the Economic Freedom of the World Index, which measures the degree to which citizens in each of 165 jurisdictions worldwide are able to make their own economic decisions without constraints imposed by others.  It was developed in consultation with over 60 scholars, including the Nobel Prize winners Douglass North, Gary Becker and Milton Friedman. Our Index ultimately determines how conducive a country’s institutions are to fostering economic freedom and entrepreneurial activity by evaluating five key areas: size of government, legal system and property rights, sound money, freedom to trade internationally, and regulation.  

So, where have we been and where are we going?  

Globally, economic freedom rose throughout the 1980s and 1990s as Western democracies deregulated and formerly socialist nations liberalized. But since 2000, the pace of reform has slowed. The high mark for both U.S. and Canadian economic freedom occurred in 2000. Since then, both countries have steadily curtailed their citizens’ economic freedom, undoing decades of progress. Not since the early 1980s did Americans and Canadians experience such low levels of economic freedom, with their business and economic climates suffering. 

That’s the macro, backward-looking, empirical assessment of our business and economic climate.   

But how do business leaders and entrepreneurs feel currently?  

That’s where I put on my other hat as a member – and Incoming Regional Chair for Canada – of  YPO, a global leadership community of 35,000 chief executives and business leaders.   

Each quarter, YPO conducts its Global Pulse Survey to gather insights and opinions from its chief executive membership. One of the things I love about my YPO colleagues is their optimism, which the Global Pulse Survey quantifies. 

This quarter’s survey produced some interesting results. When asked how the overall business and economic climate in their country affected their companies compared to six months ago, 38.7% of global respondents said it’s much or somewhat better. At the same time, 37% reported that it’s about the same. That means fewer than 25% of respondents feel things are getting worse. In addition, a majority of respondents, 61.8%, don’t expect a recession in their primary market either. In the most optimistic region, South Asia, 59.3% of respondents feel things are getting better, followed by the Middle East and North Africa region at 54.2%.  

Unfortunately, my home country, Canada, was the most pessimistic region. Nearly 30% of Canadian respondents expect a local economic recession in the next year, compared to 19.6% of respondents in other parts of the world.  

Canada also had the most respondents say that the business and economic climate is ‘much’ or ‘somewhat’ worse, at 28.0%. The good news is that Canadian CEOs are more optimistic than six months ago, when 48.3% of Canadian respondents said the economic climate was worsening.  

But this uptick in optimism may not last. The YPO survey was done before the last federal budget, delivered on 16 April 2024. That budget will worsen Canada’s investment climate by increasing taxes on capital gains, deterring investment and encouraging a more significant outflow of capital. The budget also forecasts deficits for at least five years, which increases the likelihood of future tax hikes and creates more uncertainty for entrepreneurs, investors and businesses. The response in Canada’s business community and, more broadly, throughout the media was that the budget was a significant step backward for Canada.  

It will, therefore, be interesting to see what next Quarter’s Global Pulse Survey brings for Canada.  

Niels Veldhuis is President of the Fraser Institute and Chapter Chair of YPO British Columbia.